Asian markets are expected to open on a shaky note after President Donald Trump announced tariffs on all steel and aluminum imports. This has led to a drop in commodity currencies and a decline in Asian stock futures. The Australian, New Zealand, and Canadian dollars, as well as the euro, fell in early trading. Equity futures in Australia, Japan, and Hong Kong are also pointing down.
Trump’s comments have added to market jitters, with a 25% levy on steel and aluminum imports set to be announced on Monday. This comes ahead of Federal Reserve Chair Jerome Powell’s upcoming testimony, which will be crucial in assessing the impact of these tariffs.
SA still under pressure at the back of the expropriation bill.
The S&P 500 index fell by 1% on Friday due to tariff concerns and a decline in consumer sentiment. The dollar rose after jobs data showed a healthy labor market. Nonfarm payrolls increased by 143K, with the unemployment rate dropping to 4.0%.
In Asia, Chinese shares will be closely watched, especially in the tech sector, as the Lunar New Year spending boom may mask underlying deflationary pressures in the economy. Goldman Sachs economists noted that the seasonal boost in China’s inflation is likely to turn into a drag in February.
(Feb-06) US Jobless claims rose by 11K to 219K for the week ending February 1, staying relatively low. This level is consistent with pre-Covid figures, and private employment data indicates strong hiring in January. However, despite a calm January, several major companies have announced staff reductions for early February, hinting that the quiet period may be short-lived. USDZAR saw a slight rally after this to a low of 18.5740 on a 15min window.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.
(Feb-07) SONA - President Cyril Ramaphosa’s Medium-Term Development Plan aims for inclusive growth and poverty reduction, targeting over 3.0% economic growth through infrastructure investments and reforms in state-owned enterprises. Social measures include support for the unemployed and expanded education access. The plan also focuses on building a capable, ethical state, supporting black-owned businesses, and addressing water shortages with new infrastructure and efficient management.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.
(Feb-10) On Friday (07-Feb) we saw a turn from balance or net short USDZAR position to being net long USDZAR from clients. (*) This is not surprising given the recent growing tensions between SA and the US.
(Feb-10) Latest implied topside is 18.65 but we could go higher if there is not indication of a de-escalation between SA and the US.
(Feb-10) Clients are now net-long USDZAR.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries. - Clients are now net-long USDZAR.
By Thuto Mukena - Institutional Sales Specialist (Jan-31)
It’s been a data-packed, headline-heavy week, with risk conditions swinging in all directions. The ZAR has had a choppy week, yesterday’s 25bps SARB rate cut sent the local unit in the red territory, reversing some of its prior session’s gains, leaving the pair to close the week at R18.5688/$.On the vol front, the 1-week volatility risk premium has compressed deeper into negative territory, highlighting that the market mispriced and underpriced this week’s risk conditions. USD/ZAR Implied vols also hover lower as we brace for an exit for this week , the 1W USD/ZAR implied vol tenor no longer trading at a premium over 1M. The tenor closed yesterday’s session 1.87 vol p.p below opening levels.
EM pairs saw mixed spot performance on the day, while most G10 currencies were offered, closing the session weaker. On the implied vol front, G10 implied vols largely tracked spot moves, with USD/CAD and USD/JPY 1-week implied vols standing out as the exceptions, firming by 145bps and 64bps from the open. Main event on the day was the ECB rate decision, EUR/USD 1-week implied vol dropped by 62bps, declining alongside spot in the aftermath of the ECB’s 25bps rate cut, which set the deposit rate at 2.75%. Key take aways from the press conference is that the central bank maintained a data-dependent stance on future cuts, emphasizing that policy remains restrictive while also flagging concerns about growth risks in the region.
By sizwe Mfayela - Institutional Sales Specialist (Feb-07)
Economic data releases